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Solvency II: keep kicking the can down the road

When Gabriel Bernardino, chairman of the European Insurance and Occupational Pensions Authority (EIOPA) told the Wall Street Journal that "Solvency II could start to be implemented in...2015 or 2016...[but] we'll probably go to 2016", he wasn't joking. (The WSJ published Bernardino's interview on 17 October 2012. It's available here.)

Unfortunately, it's not clear whether the same can be said of Julian Adams' speech writers. On 22 October 2012, these eager-beavers were apparently still insisting that, although the FSA is happy for firms to pick their own IMAP landing slots "at any point ... up to a maximum of 31 December 2015", firms should not infer "that 2016 is a more realistic implementation date for the Directive [than 2015]. It simply reflects the furthest end of what we regard as a sensible planning period...When a credible official timetable eventually emerges, we will obviously need to reconsider". (Julian Adams is the FSA's Director of Insurance. His delivered this speech on 22 October 2012. It's available here.)

But life was simple then. The trilogue parties had stopped arguing about long-term guarantees, and called for the impact assessments that would resolve their differences for them. After that, Omnibus II would be adopted easily, the draft Level 2 and Level 3 texts would be published for consultation and adopted quickly (the benefits of using a pre-consultation process!), and we'd slip gently into Solvency II's warming Elysian implementation pool. Can you feel the warm water gently massaging your tired implementation limbs? The sun on your face, and the breeze in your hair? Well snap out of it! It's worse than we thought:

Although the politicians have stopped arguing about long-term guarantees, they've started arguing about EIOPA's mandate and terms of reference (see Bernardino's speech of 21 November 2012, available here);

The European Parliament has delayed its plenary vote on Omnibus II twice in three months (it's now scheduled for 10 June 2013, but we're not holding or breath). (The current timetable is here);

Karel Van Hulle, the European Insurance Commissioner with responsibility for Omnibus II and Solvency II, will retire in January 2013;

Peter Skinner, an influential UK MEP and a member of the European Parliament's ECON Committee - a key working committee on Omnibus II and Solvency II - will stand down in June 2014 (his announcement is here);

There is at least a chance that Sharon Bowles, the UK MEP who chairs the ECON Committee, will step down in June 2014 (she applied, and was regarded as a credible candidate for, appointment as the next Governor of the Bank of England) or fail to get re-elected.

Which all seems to suggest that January 2016 is tighter than Julian Adams' speech writers (and many firms) would like. After all, between now and implementation, we still need:

EIOPA's impact assessments - the results should be available within 6 months' of EIOPA's mandate and terms of reference being settled (results by end June 2013?);

The completion of the Omnibus II trilogue process - which depends on EIOPA's impact assessments, the summer recess and a lot more besides (end October 2013?);

The adoption and coming into force of Omnibus II (end November 2013?);

The subsequent publication of the Level 2 Technical Standards and Level 3 Guidelines for (what is likely to be an abridged) consultation period (ending in January or February 2014?);

The consideration of consultation responses and the development of post-consultation texts (April 2014?);

The adoption and coming into force of the final Technical Standards and Guidelines - a process which the EIOPA Regulation seems to assume could take more than 6 months to complete, and is therefore unlikely to start before the European Parliamentary elections have been held in June 2014; and

A reasonable period between the publication of the final Technical Standards and Guidelines and firms being required to comply with them - commentators argue that 12 to 18 months is required; the Commission seems more inclined to allow 6.

That's a lot of work, and a lot of opportunities for slips between cups and lips, before Solvency II can be implemented. And you thought it could all be done by January 2016? Perhaps you were joking as well?LLPEmail: